MA-Afrika Western Cape High Court Judgment
(Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06
JSE Share Code: SNT & ISIN: ZAE000093779
NSX share code: SNM
(“Santam” or the “Company” or the “Group”)
MA-AFRIKA WESTERN CAPE HIGH COURT JUDGMENT
Santam has taken note of the judgement against the Company, delivered on Tuesday 17 November
by the Western Cape High Court, in the matter between Santam and Ma-Afrika Hotels (Pty) Ltd and
Stellenbosch Kitchen (Pty) Ltd, relating to policies with Contingent Business Interruption (CBI)
infectious disease extensions (the Ma-Afrika judgement).
The detailed and complex nature of the Ma-Afrika judgement, as well as its implications, require
careful consideration. We have discussed the implications of the judgement with our lead reinsurers
and key stakeholders to arrive at a comprehensive response. The Ma-Afrika judgement refers to
both the Café Chameleon vs Guardrisk matter as well as the Financial Conduct Authority (FCA)
judgements in the United Kingdom. These judgements have been taken on appeal with final
judgements expected by late 2020 or early in 2021. Santam believes that the Western Cape High
Court erred in its judgement regarding causation and the insured peril, the trends clause and the
indemnity period, and is therefore seeking leave to appeal to a higher court.
Santam is of the view that its catastrophe reinsurance will limit the net cost of contingent business
interruption claims. However, the extent of the reinsurance recoveries will ultimately depend on the
response of reinsurers to the outcome of the legal process.
Following the Ma-Afrika judgement, Santam has increased its net CBI claims provision by R1.7 billion
in addition to the R1.3 billion that was raised in June 2020. The increase in the provision is mainly
due to the Ma-Afrika judgement in favour of the insureds and the different view taken by the court
regarding the indemnity period applicable to the CBI extension. Santam’s view is that the indemnity
period is limited to three months. The court, however, found that the indemnity period is eighteen
months in this particular matter. The potential outcome of an appeal against the Ma-Afrika
judgement, including other relevant court rulings on these and other Santam policy wordings may
materially impact Santam’s assessment of the estimated net CBI claims. This could result in
significantly higher or lower actual claims. Also, the inherent complexity of business interruption
claims, as well as bespoke policy wordings for corporate clients, require significant assumptions to
be applied to determine the best estimate net CBI claims provisions. The overall financial impact of
Santam’s CBI exposures will therefore take some time to finalise. The Company will continue to
update the market on changes to its best estimate of CBI claims provisions as more information
During August 2020 R1 billion of the R1.3 billion CBI provision raised in June 2020 was paid out in the
form of relief payments to mainly small and medium-sized commercial policyholders in the
hospitality, leisure and non-essential retail services industries that have the CBI cover extension and
suffered a loss due to the national lockdown. These payments will be considered advance payments
against any finally determined claims, if the courts ultimately rule in favour of the insureds. Should
the courts rule in favour of Santam, then the amounts paid will be considered relief payments and
will not be recovered from the insureds.
Santam will continue to communicate regularly through our intermediaries to update our clients on
the status of individual claims, especially those impacted by the Ma-Afrika judgement. Santam is
committed to paying claims as quickly as possible as and when legal processes are concluded.
Underwriting results for the Santam Conventional insurance business continued to benefit from
lower claims frequency during the third quarter of 2020.
The economic capital coverage ratio of the Group as at 31 October 2020, including the additional net
CBI claims provisions of R1.7 billion, remains at the bottom end of the target range of 150% to 170%.
The financial information included in this announcement has not been reviewed or reported on by
Santam’s external auditors. Santam will provide a more detailed update of its performance in its
operational update for the ten month period to 31 October 2020 to be released on or about 2
20 November 2020
Sponsor: Investec Bank Limited
Date: 20-11-2020 12:30:00
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